New IZ Master Plan to Boost Efficiency

Why did the government decide to change the development plans for industrial zones (IZs) in the country?

Since Vietnam developed its first IZ in 1991, IZs have played an important role in promoting foreign direct investment (FDI) in the country. Until now, 60 per cent of foreign-invested projects are located in IZs, creating more than two million jobs for locals. However, there are some shortcomings that need to be addressed, and the nation’s previous development master plan was also outdated. Many IZs still remain on paper, and many others have not yet built concentrated waste water treatment facilities, causing concerns over environment pollution.

Therefore, the government has decided to review the development master plan for IZs to remove the pending projects and also improve the quality of existing zones. So far, 47 cities and provinces have completed the new master plan, while other 14 are expected to be completed this year.

What is the biggest change in the new master plan?

Overall, we have reduced the land earmarked for IZs, even though local authorities previously proposed to increase their IZ lands. Eleven IZs were removed from the new master plan and we also cut 1,500 hectares of land at 16 existing IZs. This indicates that the government wants to improve the quality of existing IZs rather than expanding the new zones without paying attention to the demand of industrial manufacturers or service providers. I believe that when the 14 remaining cities and provinces complete their new development plans for IZs this year, the land set aside for IZs will continue to decrease.

Why is the land assigned to IZs being cut, particularly when we are seeing increasing FDI inflows that surely entail more industrial land being needed?

We’ve only reduced the land area from IZs which have been planned for many years but have failed to attract developers, or we only cut land at IZs which were facing clearance issues for prolonged periods of time. This aims to improve the effective use of the land.

Currently, many developers such as VSIP, Amata or Sojitz are planning to develop more IZs across the country to tap on the opportunities of expectedly increasing FDI inflows. So, is there opportunity for them to expand these investments after the government introduces the new master plan?

Yes, this is an open-ended development master plan. But we encourage developers to invest in planned IZs which have not been developed. The government has required local authorities to only license new IZs after filling at least 60 per cent of existing IZs in their locations. Thailand’s Amata Group, for example, wants to develop a new IZ in the northern province of Quang Ninh, the government supports this plan but still encouraged Amata to develop the already-planned IZs in Quang Ninh instead of building a new zone. We prioritise sustainable development, so if a local authority licenses a new IZ outside the master plan, it should review its own development plan and reduce land at other less effective IZs.

How do you think the new master plan would affect FDI attraction to Vietnam?

At present, we have 297 IZs with the total land area of 83,956ha. Of which, 208 zones are operating. 2014 saw positive FDI increases in IZs. Between January and November last year, foreign investors committed to invest around US$ 12 billion into IZs, accounting more than 60 per cent of the country's total FDI. Overall, we are seeing an increase of investments to IZs in the future. Given the new master plan, we will encourage developers to focus all resources on the development of existing zones, and then improve the service quality of IZs. We believe this will contribute to facilitate investments into IZs.